Four out of four...

...well, after several heart attacks this past weekend my entire final four remained intact. Yes, that's right, I managed to correctly pick all four teams including the long shot 5 seed Michigan State Spartans. However, because of the wonder of weighted round scoring I could still lose if 1) Illinois fails to make the final and 2) UNC wins the whole thing. As long as Illinois makes the final I should be alright. Time to settle in for a long, stressful week--maybe I'll take up drinking....

The 326 Protest in Taiwan

As scheduled, an estimated 1 million people have taken to the streets in Taiwan to protest the anti-secession law passed by mainland China (see pics below).






Publius Pundit is doing a nice job tracking this story. What the reaction from China will be to the 326 Protest, as its being called, is unknown. One may have predicted a few strongly worded threats and military exercises, but with the Europeans surprisingly deciding not to end the arms embargo earlier this week their reaction may be more tame. While US pressure was paramount in Europe's decision not to end the ban, many have also cited the recent passage of the anti-secession law as a reason for the "temporary delay". Europeans were arguing that the embargo, enacted after the repression of protests in Tiananmen Square in 1989 by the Chinese government, was outdated and sent the wrong signal to China and the rest of the world that China should still be viewed as an irresponsible and repressive regime. However, the legs may have been cut out from under the European's argument by the tension created by China'’s anti-secession law—--a case of bad timing on the mainland’s part. Since the timing may have only stalled the lifting of the embargo, China is less apt to take any strong actions against the island, since this could further delay a lifting of the embargo (although continued US threats to retaliate against the Europeans in the area of defense contracting and technology transfers is equally if not more likely to be the cause of further delay). However, if the leadership in China sees the protests as a major blow to their ‘face’—and if domestic pressure mounts—the mainland may discount the future for the short term and take some kind of action. Then who knows where it could lead...Stay tuned...

Filed as:International Politics, China, Taiwan, United States, Europe

Wolfowitz and the World Bank

As predicted my posting rate has declined rapidly as spring break has now passed. However, in an attempt to get back on track I'll briefly mention that Matt Tubin has been collecting some great links to statements and news reports regarding the nomination of Paul “they will great us as liberators” Wolfowitz as head of the World Bank. While this has inflamed a great many parties (not surprisingly most of Europe and anyone on the left in the states), it may turn out that the man can actually handle the job. That remains to be seen. What I will say is that this looks like a strategic move on the part of the administration to have in place a trusted member of the team who understands and believes in the strategic importance of promoting democracy—as enshrined in the National Security Strategy of 2002—at the head of an organization that is certainly in a position to do just that. Additionally, while the Europeans are still outraged that the US blocked their original nominee to head the IMF a few years ago (by covnention the Europeans get to choose the head of the IMF while the US gets to choose the head of the World Bank), it appears that there will be no retribution. German Chancellor Gerhard Schroeder came out on Tuesday in support of Wolfowitz’s nomination, effectively signaling that there will be no united opposition from Europe to his nomination. This of course makes perfect sense since Germany has been falling all over themselves to mend their relationship with the administration over the Iraq War. Opposing this nomination would have essentially put them right back in the doghouse. Stay tuned for more on this story...

Filed as:Paul Wolfowitz, World Bank

Update: Cross-straight Tensions on the Rise?

To follow up on my earlier discussion of current goings on in the straits:

The US called the proposed law (set to pass on Monday) "unhelpful", China has roundly criticized US criticism of the law, while President Chen Shui-bian of Taiwan has called for a massive street demonstration to protest the law which he describes as a "major threat to regional stability". While many see this situation as one that could potential lead to conflict, a number of experts have weighed in to quell those fears. Essentially, these experts argue that the bill is actually meant to be mechanism by which the mainland can force Taiwan to maintain the status quo, rather than an attempt by the mainland to change it. The argument is that China fears that Chen has been pushing for the island to "creep towards independence" and this law is essentially a way to deter any further moves in that direction. Furthermore, the analysts go on to say why it is not in anyone's interest to begin a conflict and why there are significant incentives against such a scenario.

My problem with this view is the same I have had all along (and typically have towards these types of situations): it assumes that these actors can reasonably interpret each other's motives as well as control the likely responses by their domestic populations. It is assuming a degree of rational control over events. The worry isn't that these parties are itching to change the status quo right now, it is that these moves might trigger reactions that can easily take all the parties down a path to war--albeit unintentionally. China believes its law is merely a deterrent and as such will be effective. But what if Taiwan views it differently? What if this action backfires and emboldens the independence-element in Taiwan (essentially damaging the pan-blue coalition in the Parliament who are not pro-independence)? What if the rhetoric and public demonstrations on the island get out of hand, leading for calls within China that this constitutes “moves towards independence”, leading to Chen and his party amping up their own rhetoric so as to maintain their credibility and legitimacy with their domestic audience? What if Taiwan misreads US and Japanese criticism as a signal that they will defend the island should they take bold steps against China? If Taiwan reacts boldly with public demonstrations and rhetoric won't Chinese credibility be on the line? Can they afford to stay silent?

All of these questions are merely a way of saying that events have a way of spiraling out of control not because conflict was intended or even in the parties’ best interests, but because of the problems of misperception and over-(and under-) reaction. The "fog of war" also applies to the early stages of a dispute--one might call it the "fog of crises". Many times parties do not have perfect information and may misread the intentions/resolve of the other party. They may also take steps which tie their own hands, intentionally or unintentionally committing themselves to a course of action (like conflict) that they would rather not take. No one can know ex ante what actors will perceive and what unwitting committments they may make--so regardless of what is in their best interests, actors may unintentionally place themselves on a path that leads to conflict. So to view these moves as merely attempts to keep the peace is, I think, looking at the issue too narrowly and optimistically. Is my view overly pessimistic and more of a worst-case scenario? Sure. But my feeling is that in the realm of international politics such a view should always be present, if for no other reason than to balance out overly optimistic viewpoints . And when we are dealing with a potential military conflict, a conflict that could include the US, China, and Japan we need to have a balanced, cautious view of the situation.

Stay tuned for further updates on this issue...

Filed as:International Politics, China, Taiwan, United States

We could really use a deficit hawk right about now...

Great post this morning by Nouriel Roubini on China's role in helping the US dollar--and why it is not in their long term interests to do so. This is getting scarier and scarier...

Filed as:US economy, China, Political Economy

Update: The Soft-Underbelly of US Power?

Things keep looking better and better (thanks to Matt for the link):

Financial Times, March 1oth 2005: Treasury yields shake off Koizumi comments

While we are on the subject of protests....

...related to the story posted early, Taiwan is planning massive street protests in reaction to the all-but-certain passage of China's anti-secession law. Stay tuned...

Filed as:China, Tawain, International Politics

Catching the Fever? (will all the titles of my posts be in the form of a question?)

The media is packed these days with stories of a “democratic fever” that has apparently gripped the countries of the Middle East. Elections in Palestine and Iraq seemed to prove that democracy was compatible with the Arab world. Egyptian President Hosni Mubarak announced (seemingly out of the blue) that for the first time presidential elections will include more than one candidate. And protestors took to the streets in Beirut demanding an end to Syrian occupation and influence in their country. So it looks like authoritarianism is on the outs in that troubled region, doesn't it? Well, not so much...

Yesterday, 500,000 pro-Syrian demonstrators took to the streets of Beirut in an apparent rebuff of the “cedar revolution” as it is now being called. Their main gripe—the apparent foreign interference in their country by….the US and France!! (Man, it’s been a while since these two guys have been bedfellows) Now the rally was of course organized by Hezbollah, which calls into question the true intentions (and nationality--can you say greyhound?) of many of the pro-Syrian protestors. But considering the small size of Lebanon’s population it is safe to assume that the majority of these protestors were indeed homegrown and supportive of the regime. [ed. although, take a gander at this incredible post on the make-up of the pro-Syrian demonstrators...]

More depressing news rolled in Thursday as Lebanon’s President reappointed pro-Syrian Prime Minister Omar Karami, the same man who resigned amidst pressure from the anti-Syrian protestors only 10 days ago. The stated intention of this move was to form a “unity government” with the opposition in order to guide the country through this 'transition'…a government that would no doubt be dominated by pro-Syrian politicians. And while anti-Syrian protestors obviously rejected the move and the government opposition has initially rejected the offer, one must consider that the powers-that-be believed it was safe enough to do so, which may indicate that the "cedar revolution" may turn out to me more of a "cedar to-do". Why risk a potentially dangerous reaction unless you believed the masses weren't that massive?

Today, as if on cue, Egyptian Foreign Minister Ahmed Aboul Gheit questioned US claims that recent events signaled a trend toward democratization in the Middle East. Specifically, FM Gheit questioned the stability of the Iraq regime amidst the continued bombings by insurgents, as well as the degree to which pro-democracy currents have swept through Lebanon. Pointing to the pro-Syrian demonstrations held yesterday, Gheit said, “‘other trends’ are also afoot”. Additionally, the Foreign Minister noted that elections in Palestine may be providing false hope to those outside of the region since similar polls have taken place in the past, and we all know how democratic Palestine has been since then…

…All of this points to what should be a cautious view. Is the Middle East on the brink of a major wave of democratization? Maybe. But it is certainly too early to tell. This wouldn’t be the first time that regimes in the region allowed open contestation of government offices or that protestors took to the streets demanding change. The question is whether these small changes, which could easily be viewed as small steps designed to provide short-term political cover for these regimes domestically and internationally, can coalesce into stronger movements for true political change. The track record in the region is dismal to say the least. However, Latin America may provide us with some cause for hope. Many authoritarian/military regimes (something the Middle East does not want for) in that region democratized through small, initial liberalization steps that were intended to provide short-term relief for a perceived lack of legitimacy. Those steps however took on a life of there own and eventually led those regimes to negotiate their exit from power. Hopefully some regimes in the Middle East can walk a similar path to democracy, although I for one am hoping for the best and preparing for the worst.

Filed as:International Politics, Lebanon, Middle East

The Soft-Underbelly of US Power?

For those that did not see this story two weeks ago (and I am assuming many didn’t, since the US media isn’t all that good at covering stories about international finance—plus, it isn’t the sexiest topic—sorry Matt), central banks in Asia caused a semi-panic by merely suggesting that they would diversify their currency holdings. While the bankers did not say they were going to sell off their dollar reserves they hinted that it was in there interest to diversify their currency holdings. The dollar has fallen drastically against the Euro, and central bankers have considered diversifying there holdings to include more Euros. However, these bankers don’t need to sell off the dollars they already have to cause problems for the US economy—just slow the rate at which they purchase them. Korea merely suggested they would diversify their holdings. An editorial in the Financial Times on February 23^rd sums it up nicely:

“the market overreacted to reports that the Bank of Korea wanted to reduce the share of dollars in its portfolio. What the Koreans actually said was that they want to diversify out of low-yielding US Treasuries into higher yielding securities, which could include riskier US assets as well as non-US government bonds. And they intend to do so by diversifying the flow of reserves, not the $200bn (£105bn) stock. But while Tuesday's sell-off was founded on error, it nonetheless exposed the underlying weakness of the US currency. If the mighty dollar can be rocked by a single paragraph in a report to the Korean parliament something is amiss.”

The events of the 22^nd were quickly dismissed by some as a simple misperception by the markets of the Asian Central Banks’ intentions. Problem solved, right? Wrong. As noted above this episode should act as a warning that something is wrong with the current US economy—a massive vulnerability due to our budget deficit.

For many years the US has been the world’s largest debtor and, unlike most other countries, this has not proven to be a problem. Other states were happy to finance our enormous budget deficits by purchasing Treasury notes—essentially loaning us money—given the high confidence in and strength of the dollar. We are currently relying on the same practice to finance our current deficit, which is an all-time record by the way—currently around $477 billion and set to rise rapidly in the coming years to pay for such things as the prescription drug plan (some estimates by non-partisan analysts say it could reach $1.3 trillion by 2013). With defense spending set to reach an all time high (not that I am complaining) we are even more reliant on foreign governments for finance. Our preponderance of power internationally is dependent upon foreign governments’ willingness to provide us with financing. In fact, in order to cover our current account deficit the US must attract over $2bn of foreign capital per day. Forget about selling off dollars, all these foreign banks need to do is slow the rate at which they purchase dollars and we are in for a rough ride. In the short term this is certainly not in these government’s interests. Asian governments do not want the value of their currency to rise relative to the dollar, essentially making their products more expensive. However, Asia seems to be tiring of their reliance on the dollar and their lack of clout in Western financial circles. As William Pesek has noted, these states realize they are allowing the US to forgo dealing with the problems in its own economy (i.e. the current account and budget deficits). In the long term it is in Asia’s interest to minimize currency outflows and to diversify to a higher yielding currency such as the Euro. The question is will the US be able to clean up its act before this adjustment takes place. Given the likely rise in defense spending and the potential restructuring of social security (the cost of which has also been placed in the trillions) I am, sadly, pessimistic...

Filed as:Politics, Economics

Cross-strait tensions on the rise?

Recent moves by the Chinese, the US, and the EU has increased tension in the Taiwan straits. This convoluted issue has been quiet for some time, but with the EU set to repeal an arms embargo in place since 1989, China’s pending passage of an anti-secession law, and the US dialing up the rhetoric vis-à-vis China (as well as formalizing with Japan their strategic concern for Taiwan), I would venture to say that the region is poised to become hot once again.

Essentially, the anti-secession law is targeted squarely at Taiwan, regarded by mainland China as a renegade province. To date, China has been deterred from forcibly taking the island due to the balance of power that exists between themselves and Taiwan (largely due to US arms sales to Taiwan) as well as vague US threats to intervene and defend Taiwan should China try to take the island by force. Maintaining the status quo has long been the policy of the US--a status quo that essentially restricts actions in Taiwan that signal a desire for formal independence as well as attempts by China to revise the current situation. However, many observers have noted that while the situation appears stable it could change quickly due to unexpected actions and reactions on the part of the various players.

For example, Taiwanese President Chen Shui-bian (a pro-independence figure) has threatened to "retaliate" if the mainland passes the anti-secession law. At this point the law is a sure thing--the leadership in China could not afford to back down for fear of loosing face domestically (as well as internationally). The ball will then be in Taiwan's court, where any number of reactions is likely. The most inflammatory would be a referendum on independence, a measure President Chen Shui-bian has alluded to previously in response to the anti-secession law. While it is unlikely that Chen would risk an almost certain escalation by China in response to the referendum, Chen is likely to take measures that illustrate his dedication to Taiwanese independence as well as the state’s resolve in general. By not reacting, Taiwan risks sending a signal to the mainland that further moves would not be met with much force. Additionally, Chen draws electoral support from pro-independence elements within Taiwan—a failure to react would certainly damage his standing with a portion of voters critical for his political success. While neither party has an incentive to escalate to the use of force it is a situation that could easily arise given the incentives for both parties to demonstrate their resolve and dedication to the issue.

An added bit of complexity comes from moves by additional powers. As noted, the EU is set to lift a 15 year arms embargo against China which the US has vehemently opposed. The embargo was instituted in 1989 after the Chinese government brutally put down the student protests in Tiananmen Square. The US has argued that by allowing the Chinese to purchase European weapons systems China can quickly shift the balance of power in the straits in their favor. A likely response to a Chinese military buildup with European weapons would be an increase in US arms sales to Taiwan, further increasing regional tensions. Additionally, the US and Japan recently reaffirmed their commitment to security cooperation in the region, only this time with an added twist—for the first time they explicitly listed Taiwan as a common security issue. The statement merely stated that they viewed a peaceful resolution to the crisis as on their security interests, but this action was viewed angrily by Beijing since Japan is viewed as its main rival in the region (besides the US). The Joint Statement issued by the US and Japan came on the heels of increasingly suspicious rhetoric from both the CIA and the Pentagon that China’s military buildup is disturbing and threatens US capabilities in the region. It seems that the US is now turning its attention back to China—a security concern that has been somewhat muted since 9/11 and the run up to the Iraq War.

So what does all this mean? Is there likely to be trouble in the straits any time soon? It all depends on the reaction of Taiwan to the anti-secession law. If President Chen takes bold steps in an effort to signal the Chinese—and to this constituents—that Taiwan will not allow China to take such bold steps then trouble is likely to ensue. The mere mention of an independence referendum could be enough to force China to engage in accelerated military exercises. These exercises would likely force the US (and now Japan) to react by sending naval support to the straits (but not actually in the straits) to monitor the exercises, much as the US did during the 1995-96 crisis. In the short run, however, even this scenario shouldn’t be enough to lead the US and China into a direct confrontation over Taiwan. China is still a number of years away from acquiring the military resources necessary to take the island. Even if the EU lifts the arms embargo it is still not clear exactly what and how much the Europeans would be willing to sell the mainland. US pressure may likely limit the extent to which EU arms will actually impact the balance of power in the straits. Until the balance shifts in their favor it is unlikely that even bold provocation by Taiwan, such as a referendum or military exercises, is likely to elicit a direct military reaction by the mainland.

The only possibility in the short run would be ‘war by accident’—essentially a situation where both China and Taiwan take steps that commit them to further action. Increased public threats by both parties could have the effect of tying there hands so that the costs of backing down would be too much to bear domestically and internationally (lets not forget that although the mainland is still politically communist the leadership has used the issue of Taiwan as a legitimacy building measure—failure to act would certainly anger the general public and place the regime on the defensive domestically). This scenario depends less on the objective balance of power between the two states and more on the choices of leaders in both countries, the inferences they draw from each other’s actions and the reaction by both domestic and international actors to these actions. If Taiwan is emboldened by a tough US-Japan response and reads this as a signal that they are willing to enter the fray President Chen may feel the time is right to call the referendum. Such a move would place the leadership of China in a precarious position since there would be domestic pressure to react as well pressure to ensure that the mainland does not look irresolute over the issue in the eyes of the US and Japan.

In any case these moves are sure to lead to a serious diplomatic, if not military, confrontation in the future, if not the short term. It is certainly a story worth watching.

Filed as:Politics, Taiwan, China, US Foreign Policy

Just what the world needs---another blog....

Despite the fact that the internet is now saturated with blogs of all sorts I have decided to throw my hat in the ring and appropriate space that could be used for more useful endevours.

This blog will essentially cater to those readers interested in world politics, international relations, and foreign policy. How often I can update the site is largely an unknown, as I am a graduate student short on time--although I have an enormous impulse to procrastinate.

Anyway, please leave comments (once I actually get to a substantive post) as I am new to the art of blogging and would certainly benefit from any advice.